AMLN

FDA Re-Branding the Black Box Warning: How to Make Potential Death More Palatable

07/02/2009 by Research Reloaded

Black Box warnings are the most severe type of warning that the FDA can require for a pharmaceutical. They can indicate a wide range of potential risks, with varying degrees of probability, but one thing is for sure. The the term Black Box is downright scary and it frequently highlights a serious, though perhaps very improbable, health risk such as, well, death.

Still, to be fair, it could be simply telling me about a suicide risk that has 1/100th the probability of me similarly dying when I get behind the wheel of a car. And given the dark name, I'm far less inclined to risk the Black Box warning than to drive to the corner store. So perhaps this is a problem, that the term Black Box is too scary even if it does warn of some pretty unfortunate risks.

It appears the FDA has recognized this since they are beginning to phase-out the term with some better word choice. Is it fair if we call this a re-branding of the Black Box?

On the FDA conference call with reporters this afternoon to discuss the new warnings, two agency officials told the news media to use the phrase "Boxed warning" instead of "Black box warning." Why? As one of them put it, "Black box carries the implication, 'Don't you dare use this'." The other official added, "We don't want to scare people off (from trying to quit smoking). We just want them to be carefully monitored."

Biogen Idec Filibusters, With Drug Details, to Delay Shareholder Voting

06/16/2009 by Research Reloaded

Biogen Idec (BIIB) over-explained its drug development, then called for an extra long recess, in order to delay the shareholder vote whereby activist investor Carl Icahn was trying to repeat his success with Amylin (AMLN) Pharmaceuticals and add four representatives to Biogen Idec's board. It appears BIIB might have been contacting major institutional shareholders and trying to convince them to change their minds. Does the change of power for billion dollar companies really come down to whoever can delay a vote by boring an audience by talking amino acids all morning? Playground tactics in the world of biotech.

Nevertheless, in the end, Mr. Icahn managed to get two of his four nominees on the Biogen Idec board despite the Biogen filibuster. With the recent Amylin victory (added 2 board members there as well), Mr. Icahn is now clearly on a roll, undoubtedly helped by collapsed stock markets and biotech share prices which make any argument for management change more compelling. Still, the benefit of market sentiment aside, Icahn's victories are likely to be positive for AMLN and BIIB's future realization of value, and stock price performance. It's nice to know that someone with influence is clearly lined up with shareholder interests, given Mr. Icahn's sizeable stake. This is better than can be said for most companies.

Key Amylin Catalyst Expected Wednesday

05/24/2009 by Research Reloaded

A major battle for change at Amylin Pharmaceuticals (AMLN) could be decided this Wednesday when the company has its annual shareholder meeting and shareholders vote for a potentially new slate of boardmembers put forward by activist shareholders Carl Icahn and Eastbourne Capital. Nevertheless, despite heated rhetoric in recent weeks between both management and the activists, AMLN shares have been pretty stagnant, staying roughly around $11 for quite some time, which is up from the $6-7 lows of end 2008, but still well below 52-week highs of $35, and massively below 2007's $50 levels before questionable safety concerns arose concerning Amylin's key diabetes drug Byetta.

In recent weeks the Powerpoint has appeared mightier than the Word, and we have witnessed an intense slide-show-supported back and forth between Amylin management and activists, which bnet Pharma appears to believe Amylin management won, though perhaps in jest. I think AMLN lost. I found the Amylin presentation uncompelling in terms of defending their performance. Their cherry picked data damning Carl Icahn was quickly proven deceptive by of Mr. Icahn's reply. I have just included his opening below, a full read of the link is well worth it.

Over the last seven years, this Board has overseen the loss of billions of dollars of shareholder value despite having BYETTA, a blockbuster drug with enormous potential. Meanwhile, during this same period (the period that they have selected to criticize my investments), at the risk of being immodest, I have made billions of dollars for shareholders of the many companies I invested and became actively involved in. Businesses which I have owned and served as a director of, including casino companies, oil & gas businesses, railcar interests and Icahn Enterprises to name a few, have increased many fold in value during that same timespan, yet they fail to mention any of these investments.

Overall, I find the evidence against Amylin management is pretty strong in my view, as previously explained here. 

And it seems I am not alone. Most recently, the activist camp has won the support of four proxy advisory firms. Eastbourne has even gone and suggested that share-holding employees of Amylin suppor them as well, using the Eastbourne's support from Amylin's founder to help make their case. 

What Amylin's Established Drugs are Worth Alone

05/13/2009 by Research Reloaded

Admittedly Research Reloaded has become a bit of a war room in regards to the special situation surrounding Amylin (AMLN)  shares these days. I personally find it to be an extremely interesting special situation and now have exposure to the shares. A lot of analysis of Carl Icahn and Eastbourne Capital's proxy fight with Amylin management has been done, and remains to be done, especially as to how these activist shareholders might be able deal with Amylin's poison puts. Though Dealbook has done a good job of explaining the situation.

If Mr. Icahn and Eastbourne are successful they could trigger poison put provisions in Amylin’s 2007 indenture for the company’s $575 million convertible notes due 2014 and Amylin’s 2007 credit agreement for its $125 million term loan.

But beyond speculation on the outcome of Mr. Icahn and Eastbourne's proxy fight with Amylin management, it is also useful to try and understand what kind of value Amylin has as a company to start with and where this value comes from, before considering whether activist shareholders have their way or not.

Along these lines, simple place to look for value is from the drugs Amylin already sells, on their own, without all the overhead Amylin has just to conduct R&D, grow future revenue streams etc. Basically, it is constructive to look at the potential value Amylin's established drugs might have if someone else justed wanted to buy the rights for these drugs alone, without the rest of Amylin's other costs or potential.

AMLN - Icahn's Proxy Damning for AMLN Management

05/09/2009 by Research Reloaded

More on the battle between shareholder activists and biotech company Amylin's (AMLN) management.

Carl Icahn's latest broadside is a set of powerpoint slides, which can be found as a proxy statement with the SEC, which are pretty damning for Amylin management. Amylin management's own presentation is also on the SEC site and is a bit less compelling than that of Mr. Icahn. Hat tip to BNET Pharma for the links.

Carl Icahn's main points are that Amylin's principal product Byetta has not achieved its full potential and has a bloated cost structure partly due to a failed strategy using in-house sales representatives to target primary care. He also argues for a renogiation of the Byetta relationship with Eli Lilly (LLY) and says plainly that its ridiculous Amylin isn't profitable given the drug it owns.

AMLN - A Bird in the Hand is Worth Two in the Bush

04/25/2009 by Research Reloaded

In response to the recent AMLN piece I wrote, I had a quality comment over at Seeking Alpha, and I thought my response and the original comment were worth a post.

mr. fernando - you have already hypothesized that icahn would broker a sale to lilly that would both make him a profit and give lilly a cheaper price than amylin after fda approval of lar. you then seem to be recommending this course of action. why would you not instead recommend that the best course for investors and amylin management is to wait until after approval to allow major changes in the management and/or ownership of the company? 

I am not recommending that AMLN accept a lower price than they should. I am simply explaining what the current situation might be between the three different entities, AMLN, LLY, and Mr. Icahn. 

I am then trying to understand if there is an opportunity for new investors to make money in AMLN shares. I am not recommending a course of action for AMLN as a company, I am recommending a course of action for potential new investors in its shares. There is a difference. 

If Mr. Icahn were to broker a sale at say $25, and new investors buy at $11, then while AMLN might not be getting the best price it can, new investors will do very well and their risk will be off the table. And if AMLN does indeed end up getting a higher price, one that it perhaps deserves, then new investors will do even better.

Amylin - A Discounted Option on Byetta's Outcome

04/22/2009 by Research Reloaded

Amylin (AMLN) presents a stock opportunity with substantial optionality, and is currently in the sights of activist investor Carl Icahn. I believe Mr. Icahn may not only be trying to make himself a profit, but may also be trying to get Eli Lilly (LLY) a good deal on AMLN at the same time. This may be the win-win genius of Mr. Icahn's deal making.

Regulatory risk surrounds AMLN's key drug Byetta, but if one can come to terms with this risk, then perhaps the stock is a cheap option on Byetta's outcome, and is an option that has a strong chance of ending up "in the money". And perhaps this is how Lilly would view AMLN should the company end up doing a deal via Mr. Icahn.

Afterall, any R&D investment in the pharma world has substantial optionality. Thus buying AMLN as a discounted option, even in the face of FDA risk for its key product, wouldn't be unreasonable for LLY. Should it then be unreasonable for investors?

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